Health Outlays Still Seen Rising

By

Janet Adamy

Updated Sept. 8, 2010 12:01 a.m. ET

The health-care overhaul enacted last spring won't significantly change national health spending over the next decade compared with projections before the law was passed, according to government figures released Thursday.

The report by federal number-crunchers casts fresh doubt on Democrats' argument that the health-care law would curb the sharp increase in costs over the long term, the second setback this week for one of the party's biggest legislative achievements.

The Wall Street Journal reported Wednesday that insurance companies have proposed rate increases ranging from 1% to 9% nationwide that they attribute specifically to new health-law coverage mandates.

Democrats signaled they would ratchet up pressure on the companies. "Insurers are using the consumer protections in health reform as a cover for their own greed," said Rep. Pete Stark (D., Calif.), chairman of the House Ways and Means health subcommittee.

Michigan Rep. Dave Camp, the top Republican on that committee, said the rate increases underscore why lawmakers should repeal the legislation and replace it with changes that make care more affordable.

Regardless of the health law, national health spending has been rising in recent years and economists expect that to continue. In February, the federal Centers for Medicare and Medicaid Services projected that overall national health spending would increase an average of 6.1% a year over the next decade.

ENLARGE

The center's economists recalculated the numbers in light of the health bill and now project that the increase will average 6.3% a year, according to a report in the journal Health Affairs. Total U.S. health spending will reach $4.6 trillion by 2019, accounting for nearly one of every five U.S. dollars spent, the report says.

"The overall net impact is moderate," said lead author Andrea Sisko, an economist at the Medicare agency. "The underlying impacts on coverage and financing are more pronounced."

The White House said the law will lower costs for insured consumers by removing the hidden price they pay to subsidize the uninsured.

In the next year, spending from private health insurance is expected to grow while out-of-pocket medical costs decline because more people will stay on Cobra insurance coverage for the unemployed, the report said.

ENLARGE

U.S. health spending is projected to rise 9.2% in 2014, up from the 6.6% projected before the law took effect.
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The law's early provisions will increase overall health-care spending, the report says, while adding to benefits for consumers. The creation of new high-risk insurance pools, a requirement that children can stay on their parents' insurance plans until age 26 and other early provisions will increase U.S. health expenditures by $10.2 billion through 2013, the report says.

The new projections take into account other factors, including a delay in payment cuts to doctors who treat Medicare patients.

Insurers say they plan to raise premiums on some Americans due to the health overhaul, complicating Democrats' efforts to trumpet their signature achievement before elections. Janet Adamy and Evan Newmark discuss. Also, Justin Lahart discusses the two-track economy for American business, with global players getting boosts from fast-growing foreign markets, while companies focused on the U.S. market are hamstrung by recession-scarred consumers.

U.S. health spending is projected to rise 9.2% in 2014, up from the 6.6% projected before the law took effect. New mechanisms kick in that year to expand insurance coverage. The report estimates 92.7% of U.S. residents will have health insurance by 2019, up from 84% this year.

Once the insurance expansion begins, U.S. health spending is expected to grow slightly more slowly. Between 2015 and 2019, the report predicts, it will increase 6.7% a year on average, down from the 6.8% projected before the overhaul passed.

Out-of-pocket spending is expected to fall sharply starting in 2014 when more people gain insurance coverage through new tax credits and an expanded Medicaid federal-state insurance program. But an excise tax on high-cost plans that takes effect in 2018 will increase out-of-pocket spending as insurance providers reduce their plan benefits to stay below the tax threshold. The law is expected to slow growth in Medicare spending by 1.4 percentage points because it contains lower payments to health-care providers.

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